Dealing with Non-Paying Landlords

The one thing that every single Body Corporate fear is bankruptcy. If owners stop paying their monthly levies, then management has no money to pay for maintenance services, which means the entire building falls into decay, resulting that no bank nor independent investor will ever consider buying into the sectional tittle scheme.

Dealing with non-paying owners is a very important role of the BC’s (Body Corporate) management team. If outstanding levies go unclaimed, the entire estate and all the members (owners) will feel the financial depreciation of their property. Luckily, dealing with non-paying landlords is quite simple.

The body corporate can approach the magistrates’ court (or the high court) for a garnishee order that would allow it to seize the owner’s rental income.

What is an Emolument Attachment Order?

Commonly known as a Garnishee Order, this legal mechanism is used to recovery outstanding debt. The consumer’s (in this case; the owner’s rental) income is garnished by means of a Court Order for a specific monthly amount. This Order is normally imposed on the consumer’s employer, but in terms of a landlord’s outstanding levies, it can be imposed on the relevant tenant.

If the body corporate obtains a judgement against the sectional title owner and an order attaching his or her rental income, then it may collect rentals from the tenant. The body corporate is then obliged to provide proof to the tenant that it has obtained the right to do so.

Dealing with debt recovery is a sensitive business, one that quite a few management teams struggle with. The process required to recover outstanding levies and rates can easily turn into an ugly legal battle, damaging the relationship between the owner and the Body Corporate.

Debt can have a negative effect on you or your staff, debt collection is very degrading and demotivating, lowering productivity and/or good will.  Body Corporates should consider using specialised debt collection agencies. If each overdue account holder is contacted in an essence of help, not an enemy the process will run better. Debt collection is a sensitive industry, and if this relationship is not handled with care, then this relationship can be damaged.